I recently did an analysis for CardRatings.com of some polling data on when parents thought was the right time to let their kids use a credit card. In thinking about this, it occurred to me that it’s a bit like asking when it’s OK to let a kid use a chainsaw — the answer depends very much on who the kid is, but in any case it’s a scary thought.

According to the poll, parents most often think college is the right time to let their children use credit cards, but the answers were all over the map, ranging from letting pre-teens use cards to never wanting their kids to use credit.

My own experience

If I had been asked this question by a pollster, I probably would have fallen into the “never” camp. When I was growing up, I knew about people in my neighborhood who had gotten into serious trouble with their credit cards, and it scared me off for a long time. I didn’t get a credit card until I was well into my 20s, when I needed one because I was starting to travel for business.

Even so, credit is so pervasive that I can understand wanting to control how your kids are introduced to it, perhaps even before they leave for college so you can keep a close eye on how it goes. In other words, my answer to this poll question might be different from my advice in a specific situation.

Credit as a tool

In trying to reconcile my own personal instincts with the logic of letting older kids get used to using credit, I thought about a description that applies to a great many financial products — that they are just tools, neither inherently good nor bad, so what matters is each individual’s capability to handle that tool.

As for credit, with the proper guidance, some high school students are ready to use that tool. On the other hand, some adults are never ready to handle credit safely. If we are to take the utilitarian approach of assessing credit cards as a tool, then acquiring them should depend on some of the same tests that apply to any item in your tool shed, namely:

Don’t get it till you need it. Like most people, I can look around my tool shed, and remember the specific necessity that led to buying each tool in there. Yet credit is pitched to teenagers as soon as they turn 18, when most of them don’t really need it. That’s a problem. Get a credit card when you find you need it, not simply because someone’s trying to sell you one.

Make sure you can handle it. My wife still cringes when I use a chainsaw. I understand why — chainsaws are dangerous, and I am notoriously clumsy. Still, because I have a healthy respect for both those facts, I think I’ve learned to use this tool with the proper care. Even so, just because you find you need a tool doesn’t mean its safe for you to operate one. People who are compulsive spenders or careless record keepers should not have credit cards around, because they’ll just hurt themselves with those tools.

Know what it is costing you. Ever buy something you thought was reasonably priced, only to find the cost of replacement parts was killing you? The true cost of a tool isn’t always in the upfront price; you need to keep track of what it is costing you from year to year, so you can assess whether it’s worth it. The same goes for credit. You can sign up for a no-fee card, and the cost will seem abstract because it’s expressed as a percentage. You don’t yet know how that percentage will apply to the balances you’ll end up carrying. At least once a year, you need to look at what those credit card interest charges totalled, so you can make a rational assessment of whether this tool is worth what it is costing you.

Use it — don’t let it use you. You can use a credit card for years without it ever actually costing you anything, as long as it has no fee and you pay your balance off every month. However, if you find you can’t control your spending with the card, and you can’t stay on top of your monthly payments, then you are no longer using the card — it is using you. That’s the point at which you and your credit card need to part company.

Credit is a particularly challenging financial issue. Its overuse is a huge problem in the United States, but our economy couldn’t function properly without it. If we pass the right lessons about credit on to the next generation, maybe the overuse of credit will eventually become less of a problem. If we lead by example, the problem will get better even sooner.

Comments (scroll down to add your own):

“Need” is a funny word here. I should hope my kids never “need” a credit card–but the cash back is worth more when you’re completely broke, plus you might need goo credit for your first car and your house!

I believe it’s safer for most kids to start with credit before going off to college, getting used to paying it off every month.

Great post. I wish I had an opportunity to learn about credit cards while in high school. However, today prepaid credit(or debit) cards can be a great way to help kids learn about credit as opposed to straight on credit cards. They are able to learn something about money management without the dangers of going into debt. And with a prepaid card, they can also learn that they should not spend money they do not have because the amount on the card is a set amount that they load onto the card. I think this is a great tool to help kids learn about money management.

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